PWC Sees Console Game Sales Rising Slowly, Despite New Devices

Sales of console videogames are expected to rise slowly over the next several years, according to a new study by PwC, despite the expected release of new devices by Sony and Microsoft.

The long-ailing videogame industry, which is gathering next week for the E3 show in Los Angeles, has long been expecting a sharp upward bump in console sales following the release later this year of Sony’s PlayStation 4 and Microsoft’s Xbox One, both of which have a large base of dedicated customers.

PwC says it expects worldwide console games sales to grow 4.2% to $25.98 billion this year, up from $24.93 billion a year prior. In 2014, sales are expected to rise another 6.4% to $27.62 billion.

That’s far less than the 28% growth the industry saw in 2007, after the last batch of new consoles were released. But it’s still potential relief for game makers, which have been seeing steady declines in game sales for more than a year–captured in PwC’s own numbers, which show nearly a 10% drop in 2012.

But Michael Yatsko, a strategist at the firm who focuses on the games industry, said that the console games market is still strong, particularly for games and products delivered over the Internet.

While sales of packaged disks are expected to remain rather steady for the foreseeable future, sales over the Internet are rising sharply. In 2014, sales of console games over the Internet are expected to hit $7.24 billion in 2014, up nearly 24% from the $5.86 billion estimated this year. And by 2017, those sales will hit $10.75 billion.

That spells bad news for brick-and-mortar retailers if they rely too heavily on packaged goods, he adds. Some companies, such as GameStop, have begun expanding into consumer affinity programs, encouraging gamers to list the products they own with the company so it can more effectively offer advertisements and deals based on their tastes. The company also sells codes in its stores which can be entered into a videogame console in order to redeem a game or an additional map or storyline.

“There has to be a compelling digital component to their value proposition,” Yatsko said of retailers.

Meanwhile, PwC said, the PC–whose own sales have entered a tailspin–appears to at least be holding its game sales steady. PwC said total PC game sales will remain roughly flat for the next few years, holding at around $7.1 billion. The way they’re sold will change, however, PwC said, with packaged physical disks once again giving way to games sold over the Internet. This year, physical disk sales will represent $2 billion. By 2017, PwC said, they’ll be $1.1 billion.

The least surprising part of the report is sales of games for mobile devices. In 2008, the year Apple launched its App Store for the iPhone, mobile games sales tallied about $5 billion. The now much-expanded mobile apps market is expected to generate $9.94 billion in game sales this year, PwC predicts. By 2017, mobile games will represent $14.4 billion in total spending.

Bottom line? “Gaming is growing and it will continue to grow at exceptional rates compared to other entertainment categories,” Yatsko said.